Textbook Problem

Four economic classifications of mergers are (1) horizontal, (2) vertical, (3) conglomerate, and (4) congeneric. Explain the significance of these terms in merger analysis with regard to (a) the likelihood of governmental intervention and (b) possibilities for operating synergy.

Summary Introduction

To discuss: The significance of the four economic classifications of mergers on the likelihood of governmental intervention.

Introduction:

A process or an agreement where two or more firms combines together to form one new company is termed as Mergers.

Explanation of Solution

The significance of the four economic classifications of mergers on the likelihood of governmental intervention is as follows:

The mergers that result in the government intervention from the four economic classifications of mergers are as follows:

• Vertical mergers
• Horizontal mergers

These types of mergers would result in the operating synergy.

Summary Introduction

To discuss: The significance of the four economic classifications of mergers on the possibilities for operating synergy.

Explanation of Solution

The significance of the four economic classifications of mergers on the possibilities for operating synergy is as follows:

The Conglomerate merger takes place when a dissimilar company combines together to form a new company. However, the congeneric merger occurs with same general industry. Both these mergers are not attacked by the government and even they provide less synergistic benefits.